Forestry investments can provide steady investment returns over the long term if managed well. Organizing where your forest will be, how it will be managed, and what species of trees you will grow there is critical for success in forestry investing. If you want a different option to diversify your investment portfolio, forestry investments could be right for you. Read on for a guide to forestry investments in the US.
When looking at forestry investments within the United States, the location of the forestland plays a substantial role. The southern states, including Georgia, Alabama, Mississippi, and Arkansas, are generally favored because of their thriving timber market, a good climate for timber growth, and the usually lower land costs compared to other parts of the country. Oregon and Washington in the Pacific Northwestern also offer lucrative opportunities, especially for those interested in softwood species like Douglas Fir and Western Hemlock. The Northeastern United States, specifically Maine, provides a market for hardwood species, including oak and maple, on more reasonably priced land than other northeastern states.
Buying land near you versus a distant area depends on several factors and your comfort level. Proximity could allow for easier oversight and management, mainly if you are new to forestry investment or want a more hands-on approach. However, a long-distance investment could offer better financial returns if the forestry market in that area is more lucrative than yours. Whichever way you choose, employing a professional forestland manager to help overcome the challenges of managing forestry properties could be necessary.
For short-term investment (5-15 years), fast-growing species like pine trees, particularly Southern Yellow Pine, offer potential advantages. In the Southern US, pine plantations can be managed for short rotation periods, offering quicker returns. These are often known as a “short rotation” species because they reach marketable size faster than other trees. Remember, though, that they may require demanding management to reach their full potential- soil quality, climate, and pest/disease pressures may influence growth rates. Make sure to put an investment plan together that considers the market for each type of wood when planning your investment, and consult a forestry professional to ensure you choose the best species for your situation.
Examples of short rotation species:
Hybrid Poplars can be a great option-they reach harvestable size within 10-15 years, and their wood that’s easy to work with, making it commonly used for pulp, paper, and lumber.
Eucalyptus can grow incredibly fast and can be ready for harvest within 10-15 years. However, they’re best suited to warmer climates and can become invasive if not carefully managed. Their wood is processed for pulp, paper, and bioenergy production.
Southern Yellow Pine, including Loblolly Pine and Slash Pine, grows relatively quickly and can be harvested in as little as 20-30 years, which is quick for a softwood tree used for lumber, pulp, and paper.
Bamboo’s rapid growth makes it ideal for short-rotation forestry- some species can even be harvested within 3-7 years. Bamboo has many uses- from construction material to paper, flooring, and straws-there is so much potential. Management is super crucial because bamboo is highly invasive; it loves to travel.
Paulownia can be harvested in as little as 7-10 years, and its wood is used for making furniture and musical instruments.
Black Locust proliferates and is highly durable. It can be ready for harvest in about 30 years, and its wood is used for fence posts, flooring, and furniture.
Slower-growing hardwood trees tend to be more valuable. Hardwood species such as oak, walnut, and cherry take longer to mature, but their wood is regularly in high demand for furniture, flooring, and veneer. Their growth can be viewed as a long-term, inflation-protected bond, steadily increasing in volume and value over time. The long-term nature of these trees can make them ideal for generational wealth creation. A 50-year horizon does provide a realistic timeframe for several hardwood species.
Examples of hardwoods:
Red oak is one of our most essential hardwoods in North America. Its wood is processed for furniture, flooring, and the important wine barrels. Red oak trees can be ready for harvest in about 40-60 years, depending on the growing conditions.
White oak is used for furniture, flooring, and it’s also valued for making whiskey barrels. White oak generally matures in around 50-60 years.
Cherry wood is highly desirable for its rich color and straight grain- it is used in luxury furniture, cabinetry, and veneer. Depending on growing conditions, a cherry tree can be ready for harvest in around 50-60 years.
Maple is used in beautiful furniture, flooring, and making musical instruments. Sugar Maples are harvested for their valuable timber, usually in about 40-60 years. They also have the added benefit of providing sap for maple syrup which can be an additional business allowing local farmers to tap your trees for a yearly fee.
Black Walnut is used for luxury furniture, veneers, and gunstocks. Reaching a harvestable size can take 30-60 years, depending on growing conditions. You can also have a side arrangement with a local farmer for nuts. I have some beautiful black walnut wooden accessories for meats and cheeses that are handmade. This is a fantastic wood for artisanship.
Yellow Poplar (also known as the tulip tree) is a hardwood species. It grows faster than many other hardwoods, ready for harvest in about 35-50 years, and its wood is used for furniture, siding, and pulpwood.
Remember that optimal growth conditions, including soil type, rainfall, and temperature, will vary by species when considering a long-term investment in hardwoods. Managing the trees over their long lifespan, including thinning and pest management, will also significantly impact your return on investment. This is one reason many forestry investments focus on short-rotation plants. Forestry investment is not passive income; it involves unique risks, including natural disasters, pests, and market volatility. However, with due diligence, a professional management approach, and patience, forestry investing can be a rewarding component of a diversified investment portfolio.
Remember that every investment strategy should be personalized according to your financial goals, risk tolerance, and time horizon. Always consult a financial advisor or forestry professional when investing in this sector. Read more about forestry investments with these posts, The Green Gold Rush and Forestry Investments for Carbon Tax Credits. Subscribe for more investing posts.
